Bharat Highways Infrastructure Investment Trust InvIT - Get Date, Price, Review and Details

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In this article, we will discuss:

• About the company
• Use of Proceeds
• Key Strengths and Opportunities
• Risks
• Financial Snapshot
• Conclusion

About the company

Bharat Highways Infrastructure Investment is an infrastructure investment trust established to acquire, manage and invest in a portfolio of infrastructure assets in India. The Trust is authorized to carry on the activities of an infrastructure investment trust under the SEBI InvIT Regulations.

The portfolio assets of Bharat Highways consist of seven road assets, all operating on a HAM basis, in the states of Punjab, Gujarat, Andhra Pradesh, Maharashtra and Uttar Pradesh. These roads are operated and maintained pursuant to concession rights granted by the NHAI. They are owned and operated by the Project SPVs, which are currently wholly owned by G R Infrastructure Limited (GRIL).

In addition, the InvIT has entered into a ROFO Agreement with GRIL, pursuant to which GRIL has granted a right of first offer to the InvIT to acquire certain other assets owned and developed by GRIL.

Use of Proceeds:

The InvIT will utilize the net proceeds towards the following objects:

• Providing loans to the Project SPVs for repayment/ pre-payment, in part or in full, of their respective outstanding loans (including any accrued interest and prepayment penalty) and
• General purposes.

Key Strengths and Opportunities:

• Sizeable portfolio of stable revenue-generating assets with no construction risk and long-term predictable cash flows: Bharat Highways has a portfolio consisting of 7 InvIT Assets having an aggregate length of approximately 497.292 km located on national networks across five states in India. Given that all its InvIT Assets are on a HAM basis, its entire revenue is expected to continue in the future from annuities paid by the NHAI, which signifies the steady nature of income.
• Attractive industry sector with strong underlying fundamentals and favorable government policies: The roads and highways sectors play an important role in the overall economy of India. The development of the infrastructure sector has been a priority area for the Government and has witnessed enhanced public investment over the years. The Government’s focus on and sustained increases in budgetary allocations for the sector as well as the development of comprehensive infrastructure policies will be beneficial to the business in terms of bringing in more opportunities for acquisition of assets.
• Growth opportunities and rights to expand portfolio of assets: Through the ROFO Agreement, the InvIT will have a right of first offer to acquire certain assets of GRIL, including the projects currently owned by GRIL or which may be acquired or developed by GRIL or its existing or future subsidiaries. This access to future road assets of GRIL or its existing or future subsidiaries will be an important source of the InvIT’s growth in the future.
• Consistent track record in operating and maintaining projects in the roads sector in India: The InvIT intends to leverage the experience and expertise of its Sponsor, and its Associate NMHPL, to gain a competitive advantage within the road and highways industry. NMHPL is a road engineering, procurement, and construction company, with experience in design and construction of various road/highway projects and has over six years of experience in the execution of the projects.

Risks:

• The InvIT is a newly settled trust and does not have an established operating history, which will make it difficult to accurately assess future growth prospects. The InvIT was set up as an infrastructure investment trust on August 3, 2022. The InvIT does not have any operating history or its own historical financial information by which its past performance may be assessed. This will make it difficult for investors to assess its future performance.
• Any failure and inability to identify and acquire new infrastructure assets that generate comparable revenue, profits or cash flows may have an adverse effect on the business, financial condition, cash flows and results of operations and our ability to make distributions.
• The concessions in respect of the InvIT Assets are its principal assets. Its ability to receive annuity payments and apply such amounts to make distributions to its unitholders will depend on the respective Project SPV’s continuing concession right from the NHAI to operate the InvIT Assets. If any of its InvIT assets are terminated prematurely, it may not receive payments due which may result in a material adverse effect on its financial condition.
• If Bharat Highways fails to maintain the roads constructed by it as per the relevant contractual requirements, it may be subject to penalties or even termination of its contracts, which may have a material adverse effect on the reputation, business, financial condition, results of operations and cash flows.

Financial Snapshot:

Conclusion:

The initial portfolio assets of Bharat Highways would consist of seven road assets, all operating on a HAM basis, in the states of Punjab, Gujarat, Andhra Pradesh, Maharashtra and Uttar Pradesh. These roads are operated and maintained pursuant to concession rights granted by the NHAI and are owned and operated by the Project SPVs, which are currently wholly owned by GRIL. All of the InvIT Assets are HAM projects awarded by NHAI and the revenue stream is primarily through annuity payments from the NHAI. GRIL is monetizing future annuity payments (including interest payable thereon) and O&M income receivable from the NHAI by transferring the InvIT Assets to the InvIT. This revenue will be ultimately given out to investors as dividends. The understanding of the business of InvITs and their taxation can present challenges for investors due to its complexity. Moreover, the historical performance of other InvITs has also not been particularly encouraging, which would further add to the complexity and hesitation for investors considering investing in them. Considering these factors, investors are advised to avoid the InvIT IPO.